May/June 2021

BKH is a major public limited company. It has 2,000 employees working at 18 locations. BKH sells a variety of insurance products, including house and car insurance. BKH’s shareholders want the business to raise profit. The Managing Director understands that higher profit can conflict with the aims of other stakeholder groups. She stated: ‘Private sector businesses have different objectives to public sector organisations.’ BKH is also planning to grow by taking over another insurance company.

Enterprise, business growth and size

PJA manufactures fashion clothing for 16-25 year olds. A lot of its rivals are multinational companies. Every 3 weeks PJA launches new products. Because of import quotas, all of PJA’s products are produced in a local factory. The Managing Director is examining PJA’s financial statements by using ratio analysis. An extract appears in Table 2.1.

Analysis of accounts

Alex set up APB as a sole trader enterprise 4 years ago. APB supplies printing services to local firms, including leaflets and brochures. Alex believes that a strong location matters to every business. All of APB’s workers are given on-the-job training. Alex adopts a democratic leadership style and uses job rotation to keep employees motivated. Because demand has risen, Alex intends to purchase another printing machine. This will cost $1800. Alex must choose a suitable source of finance.

Motivating employees

Economic growth in country X has opened up many opportunities for new businesses such as TGH. TGH produce a range of personalised mobile (cell) phone cases by using job production. Quality assurance matters to all 8 employees. TGH operate in a niche market. The Marketing Manager uses e-commerce as TGH’s channel of distribution. She is thinking about ways to strengthen customer relationships.

Marketing, competition and the customer

Pamela runs her business as a sole trader. She began her successful photography business 30 years ago. Her work focuses on photographing people and places for posters, calendars and fashion magazines. This is a niche market. Pamela includes cost-plus pricing in her marketing mix. Providing a high quality service is important to Pamela and her 2 employees.

Marketing mix

NPX is an online retail business. Every order is dispatched straight to customers from its warehouse. NPX employs 60 full-time workers. The Operations Manager is studying NPX’s cash-flow forecast. An extract appears in Table 2.1. To raise productivity, the manager intends to bring in new technology that can pick and pack all the items for each order. This would make 35 workers redundant. The technology will cost $40 000. The manager is deciding whether to use internal sources or external sources to finance this technology.

Cash-flow forecasting and working capital

GHT is a public limited company making steel items such as gates and garage doors. It has a flat organisational structure and a short chain of command. GHT has many stakeholder groups, including 600 employees. The Managing Director is thinking about introducing job rotation to raise employee motivation, and he has also been examining some financial information. An extract appears in Table 3.1.

Costs, scale of production and break-even analysis

Raul runs a small orange farm in country Z. As with all primary sector activities, farming gives rise to external costs and external benefits. Raul sells all 600 tonnes of his oranges straight to a drinks manufacturer in country E. The Government of country E plans to bring in either import tariffs or quotas. Raul said: ‘This might help country E’s Government meet one of its economic objectives, but what effect will it have on firms that export to country E?’

Business and the international economy

WYP operates as a partnership business. Greg and his 3 friends launched the business 7 years ago. WYP manufactures eyeglasses (spectacles), which are sold only via its website. Each pair of glasses costs $95. That is $200 cheaper than its main rival. Greg said: ‘It was hard at the beginning because we were unable to obtain trade credit. We also knew that building customer loyalty would take time.’ Greg believes that selecting the right promotion method is vital to the success of any new product.

Marketing mix

Nadia launched her successful hairdressing business 4 years ago. Keeping quality high has always been important to Nadia. She said: ‘I began with no experience of business plans, recruitment, cash flow or profit. I did not understand how economic issues such as inflation could influence a business. Now I have 5 hairdressing shops and 20 employees. Last year I earned a profit of $100 000.’ Nadia is intending to expand her business. One way she could do this is by selling franchises.

Enterprise, business growth and size

CTF is an ethical business. It makes a variety of toys. CTF competes in a competitive market. Over time, technology has altered production at CTF. The Operations Manager is examining break-even information. Table 3.1 shows an extract of the cost and revenue data for product X. After the closure of its local supplier, the Operations Manager is thinking about importing raw materials for product X.

Costs, scale of production and break-even analysis

DCN is a major chemical firm. It employs 8 000 workers in its 3 factories. DCN has agreed to form a joint venture with a glass making business to create a new kind of packaging that is environmentally friendly. DCN’s Managing Director commented: ‘A joint venture has drawbacks. The two businesses use different leadership styles and have different business objectives. We will need to consider how to remove any possible communication barriers.’

Types of business organisation

Explain four reasons why the relative significance of the primary, secondary and tertiary sectors changes in a country.

Economic issues

Explain two reasons why FO needs to manage all of its resources efficiently when producing goods.

Production of goods and services

Explain how FO could make use of one internal source and one external source of finance as it grows.

Business finance

Make use of the information in Appendix 2:

Costs, scale of production and break-even analysis

Explain two advantages and two disadvantages of forming a private limited company.

Types of business organisation

Explain one probable advantage and one probable disadvantage for Tandeep if he chooses to import the pushchairs (strollers) that he sells.

Marketing mix

Explain two reasons why Appendix 3's cash-flow forecast is important for TT.

Recruitment, selection and training of employees

Explain four reasons why the level of inventory matters to TT.

Cash-flow forecasting and working capital

Explain four factors that could affect where a tertiary sector business locates.

Location decisions

With reference to Appendix 2, explain one external cost and one external benefit connected with Ruben’s business.

Environmental and ethical issues

Explain how four legal controls over employment could affect Ruben’s business.

Recruitment, selection and training of employees

Explain two ways in which the market research data in Appendix 1 could support Ruben when making business decisions.

Business finance